Why Losing $1,000 is a Big Deal

Posted in Debt Management, Student & College on

losing-money

I love the real life examples in the post Why Losing $1,000 Per Year is a Big Deal. Erin (aka Broke Millennial), states that, “According to a recent study from the New America Foundation, millennials graduating with bachelor’s degrees between 2011 – 2012 are paying nearly $1000 more per year in student loans than their contemporaries who wrapped up college in 2008.” She makes this very tangible and lists what $1,000 a year means in her life, like utilities paid for or just over three months of groceries.

The other part of this equation, which Erin also touches on is the compromised ability to save. Let’s say you had to pay off student loans for 15 years. You’d be able to save $15,000 and potentially that figure would be higher depending on the performance of the investments chosen. This could mean the difference between a safety net, in the form of an emergency fund, a down payment, the ability to afford to pay for a car in full and not take on further debt or retirement savings. These are things that can make the difference between financial hardship and financial stability.

My recommendation is to consider the ways you can save (or make) an additional $85 a month (and make that savings automatic). That adds up to about $1000 per year. Over time that seemingly small monthly amount can add up.

Lifestyle Inflation: How to Earn More, Spend More and Get Nowhere

I’m glad Erin is bringing awareness of our tendency to spend what we make in the post titled, Lifestyle Inflation: How to Earn More, Spend More and Get Nowhere. Our default as humans seems to be; spend what is in our checking account. The temptation to spend more certainly applies to those making more money out of college but it also applies to anyone who receives a raise or cost of living increase. Let’s say you receive a small raise of 3%. Put that money into your 401(k). You won’t miss it in your checking account because it wasn’t there before, you’ll receive a tax benefit and you’ll be saving for retirement. If you do that every time you receive a raise it will add up over the years. If that 3% went into your checking account it is likely it would go unnoticed and be spent.

Skip the Finance Courses and Just Watch The Real Housewives

Erin also offers a little pop culture to keep us on our toes in, Skip the Finance Courses and Just Watch The Real Housewives. Here are two of the truisms she shares. First, big houses don’t lead to wealth. This is absolutely true we saw this in the recent housing crisis and if you need any more proof, the documentary The Queen of Versailles will drive it home. Second, it’s important to discuss finances with your partner. When you get married you and your spouse are treated as one financial unit legally. You’re filing taxes together and many other decisions you make have an impact on your shared financial future. Understand your different rolls and make time to discuss finances.

Start with small and consistent savings so that you can continue to SaveUp!

Brokemillenial.com is a fun and educational blog I reciently discovered. It features a number of practical tips. I thought I’d share some of my favorite posts with you and give you my perspective as a CERTIFIED FINANCIAL PLANNER™.

This post was written by SaveUp’s personal finance contributing writer, Catherine Hawley, CFP®.

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Written by Catherine Hawley

Catherine is a CERTIFIED FINANCIAL PLANNER (TM) who offers accessible and objective financial advice to individuals and families. Her aim is to help clients gain clarity and confidence so they can pursue their definition of financial success. You can find more information about her independent practice at www.catherinehawley.com. She has worked at Rhodes & Fletcher, LLC as a Personal Benefits Specialist and at the firms of Bernstein Global Wealth Management and Barclayʼs Global Investors. Catherine has a bachelors degree in communication studies from the University of California, Los Angeles where she was a scholarship athlete and captain of the womenʼs tennis team.